We should have told police: Stevens

Richard Baker and Nick McKenzie

RESERVE Bank governor Glenn Stevens yesterday admitted it would have been "prudent" for the Australian Federal Police to have been told of corruption concerns within one of the bank's currency printing subsidiaries in 2007.

Mr Stevens made the admission during a day-long hearing before Federal Parliament's economics committee where he, his recently retired deputy Ric Battellino and assistant governor Frank Campbell were questioned about their handling of a bribery scandal involving RBA subsidiaries Note Printing Australia and Securency.

While defending the RBA's decision to refer detailed bribery allegations made by a whistleblower in 2007 to law firm Freehills rather than police, Mr Stevens said that — with the benefit of hindsight — police should have been also informed.

"If I review this in my own mind and contemplate whether we might see some parallel set of circumstances, I think that additional step [informing police] would be prudent," Mr Stevens said.

"If pressed on this, I would have to say that there should have been more scepticism and more questioning of the management of both companies earlier than their was."

The RBA only called police to investigate the companies' use of foreign agents in May 2009 after The Age revealed corruption concerns within Securency.

Police last year charged Securency and NPA, along with eight former executives, with bribery offences in Vietnam, Malaysia, Nepal and Indonesia.

The charges in Malaysia and Nepal were based on information provided to the RBA by former Note Printing Australia company secretary, Brian Hood, in mid-2007.

In their most frank account of the bribery scandal to date, the RBA's leadership team yesterday said:

Prime Minister Julia Gillard had not requested a briefing on the bribery affair. Mr Stevens said Ms Gillard's predecessor, Kevin Rudd, "didn't express any particular view" when briefed in 2009.

Former treasurer Peter Costello was never briefed about corruption concerns that emerged at NPA during 2007, with Mr Stevens yesterday saying it never occurred to him to do so.

The investigation by Freehills into 2007 bribery allegations by NPA was limited in its scope, with the agents accused of corruption never questioned nor their bank accounts examined.

Mr Battellino denied a claim made by Mr Hood to a parliamentary committee last week that in 2008 the then deputy RBA governor told him to never mention NPA's agent problems to anyone.

Mr Stevens said it was appropriate for the RBA and NPA board to have relied upon the 2007 advice from Freehills.

"I think it was reasonable for them to act in that way, to have a process of independence with a degree of urgency, with serious outside advice and to act as they did," he said.

"I don't see much to gain going back second guessing whether they [Freehills] got it right or wrong."

Mr Stevens said the RBA would have called police in 2007 had Freehills advised it was necessary.

The Freehills report and several other internal RBA documents relevant to the scandal were not made public yesterday because of the ongoing criminal prosecutions of several former NPA and Securency executives in Melbourne.

However, under strong questioning from various committee members, Mr Stevens and Mr Battellino acknowledged that Freehills did not speak to the agents accused — and since charged — with bribery. Nor did Freehills have access to their bank accounts or other important information.

Greens MP Adam Bandt read out a passage from the Freehills report that focused on NPA's possible exposure to foreign bribery and stated there were "relevant circumstantial facts that could give rise to that instance".

The most testy exchange of the day occurred between Mr Battellino and Liberal MP Tony Smith, whose strong questioning at previous hearings led to yesterday's special meeting.

Mr Smith pressed Mr Battellino on his testimony before the committee in August last year during which he answered questions about the 2007 corruption concerns at NPA but did not reveal his meeting with Mr Hood or Mr Hood's provision of a five-page memo.

However, five months later at hearing in February this year, Mr Stevens confirmed Mr Battellino had received corruption warnings in writing from a senior NPA manager in 2007. Mr Battellino had retired shortly before this hearing.

Mr Battellino yesterday said he had not mentioned his 2007 meeting with Mr Hood at previous hearings because he had been asked by Mr Hood to keep the meeting confidential.

"I regret putting the interests of the whistleblower ahead of the bank and myself. Looking back, I wouldn't have agreed to those stipulations that he demanded," Mr Battellino said yesterday.

Asked by Mr Smith why he did not last year disclose his 2007 meeting with Mr Hood when Mr Stevens felt able to do so months later, Mr Battellino said: "I think Mr Stevens was asked specific questions about the meeting. I wasn't asked specific questions ..."

Mr Battellino said he was unsure what he would have done if he was asked specifically about his interaction with Mr Hood given the confidentiality issues.

"It's an interesting question, what would I have done? I really don't know," Mr Battellino said.

Mr Hood last week accused the RBA of mis-handling him as a whistleblower and claimed he was forced out of his job at NPA in 2008 after raising corruption concerns. He has lodged a legal claim with the RBA over his departure.

Mr Stevens said NPA no longer used agents and the RBA was looking to sell its 50 per cent stake in Securency.

"The Reserve Bank board has had discussion on these issues over the past year or so, and has benefited from advice from external experts on corporate governance," Mr Stevens said.